NIM06905 - Class 1 NICs: Employment Related Securities (ERS): Internationally Mobile Employees (IMEs): European Economic Area (EEA) States

Paragraph 18(5) of Part 9 of Schedule 3 Social Security (Contributions) Regulations (SSCR) 2001 (As inserted by The Social Security (Miscellaneous Amendments No. 2) Part 1, Regulation 21(3) 2015 / Statutory Instruments 2015 No. 478)

Paragraph 18(5) of Part 9 of Schedule 3 SSCR 2001 provides the conditions to disregard the total instalment, as calculated at NIM06890 and NIM06895, where there is no liability to pay earnings-related contributions because the employed earner, who is determined in accordance with EC Regulations 883/2004 and 987/2009, is subject to the legislation of another European Economic Area (EEA) State or Switzerland.

The EC Regulations co-ordinate the social security schemes of the EEA Member States (including Switzerland). They ensure that when a person moves between countries to live and work, they are only made subject to the social security legislation of one country and are not double charged social security contributions on the same earnings.

Under the EC Regulations, a worker who is posted by their employer to work in another EEA country temporarily can remain subject to the social security legislation of their home country. They can apply for a Portable Document A1 which acts as evidence of this continuing liability. They will continue to pay social security contributions as normal and no contributions will be payable in the other country. This prevents demands for social security contributions from the host State and a “double charge” occurring on the IME’s earnings.

In accordance with the daily earnings calculation example at NIM06890:

Example 1 - ERS awarded in UK

  • IME leaves the UK on 1 January 2014 to work in another EEA State
  • No A1 held - therefore the IME is subject to social security contributions in the other Member State from the date of arrival (Article 11 of Regulation 883/2004 applies)
  • UK NICs liability due for period 1 January 2013 - 31 December 2013 only (365 days)
  • UK NICs due on 365 days @ £913.24 per day = £333,333

Paragraph 18(5) of Part 9 of Schedule 3 SSCR 2001 disregards 730 days (1 January 2014 - 31 December 2015), £666,667 of ERS earnings.

Example 2 - ERS awarded in UK

  • IME leaves the UK on 1 April 2013 to work in another EEA state
  • A1 held covering the period 1 April 2013 to 31 March 2015
  • IME becomes subject to social security contributions in the EEA state from the date after the A1 expires (1 Apr. 2015)
  • UK NICs liability due for period 1 January 2013 - 31 March 2015 only (820 days)
  • UK NICs due on 820 days @ £913.24 per day = £748,858

Paragraph 18(5) of Part 9 of Schedule 3 SSCR 2001 disregards 275 days (1 April 2015 - 31 December 2015), £251,142 of ERS earnings.

Example 3 - ERS awarded in another EEA State

  • IME arrives in the UK from another EEA State to work from 1 January 2014
  • No A1 held - therefore the IME is subject to UK NICs from the date of arrival in the UK (Article 11 of Regulation 883/2004 applies)
  • UK NICs liability due for period 1 January 2014 - 31 December 2015 only (730 days)
  • UK NICs due on 730 days @ £913.24 per day = £666,667

Paragraph 18(5) of Part 9 of Schedule 3 SSCR 2001 disregards 365 days (1 January 2013 - 31 December 2013), £333,333 of ERS earnings.

In Examples 1 - 3, UK NICs is apportioned in line with the period the IME was subject to UK NICs legislation. A double charge could occur whereby the other EEA State subjects the full ERS earnings to their social security legislation at the point of vest, see NIM06915.

Example 4 - ERS awarded in UK

  • IME leaves the UK on 1 January 2014 to work in another EEA State
  • A1 held covering the period 1 January 2014 - 31 December 2015 (when ERS vest)
  • UK NICs liability due on £1m
  • No double charge would occur.

Example 5 - ERS awarded in another EEA State

  • IME arrives in the UK from another EEA State to work from 1 January 2014
  • A1 held covering the period 1 January 2014 - 31 December 2015 (when ERS vest)
  • No UK NICs liability due on £1m
  • No double charge would occur.

Further information on EEA states can be found at NIM33020.